Company Briefs

Fieldwood makes splash with Apache GOM buy

Tiny Fieldwood Energy LLC made a big splash in the Gulf of Mexico in mid-July, snapping up $3.75 billion worth of Apache Corp.’s assets in the Gulf of Mexico, a move that vaults it into the Gulf’s big leagues 10 months after its initial capitalization.

Apache planned to sell the mature fields as part of an asset-restructuring program, which pushes the company’s focus back onshore. In addition, the company will pay down debt and buy back shares with proceeds from the sale.

Fieldwood, which was capitalized in December 2012 with $625 million from private-equity firm Riverstone Holdings LLC, will focus its operations in the Gulf, where it will acquire the largest operated asset base in the Gulf of Mexico Shelf, comprised of more than 500 blocks and 1.9 net million acres. The deal is scheduled to close on Sept. 30.

At the end of 2012 Apache reported total proved reserves attributable to the assets of 239 million barrels of oil equivalent (MMBOE), of which more than 55% is oil and more than 75% is developed. Current daily production exceeds 95,000 BOE and is at least 90% operated. Apache will retain 50% of its ownership interest in all exploration blocks and in horizons below production in developed blocks.

“This transaction is an important step toward rebalancing our portfolio,” said G. Steven Farris, Apache’s chairman and chief executive officer. “At the end of this process, we expect Apache to have the right mix of assets to generate strong returns, drive more predictable production growth, and create shareholder value.”

The company intends to use proceeds to reduce debt and enhance financial flexibility and to repurchase Apache common shares under a 30-millionshare repurchase program authorized by the board of directors earlier this year.

Additionally, Fieldwood and Apache will jointly participate in deep exploration opportunities on the acquired assets to target a robust inventory of high-potential prospects, including sub-salt horizons around known producing fields.

Matt McCarroll, president and chief executive of Fieldwood, said, “Apache is clearly the preeminent operator on the Gulf of Mexico Shelf, and Fieldwood is very enthusiastic about the opportunity to continue this legacy going forward. … We’ve been looking at a number of areas, all conventional…but when this came along we dropped everything else. We’ve been working on this for a couple months.”

McCarroll said he may eventually expand Fieldwood from the Shelf to onshore the Gulf Coast. Fieldwood’s 12 employees will be joined by substantially all of Apache’s Shelf employees.

Fieldwood will finance the purchase with capital from Citigroup Global Markets, J.P. Morgan, Deutsche Bank, Bank of America Merrill Lynch and Goldman Sachs. In addition, Riverstone has increased its equity commitment. Vinson & Elkins LLP and Simpson Thacher & Bartlett LLP were legal advisors to Fieldwood.

McCarroll and other Fieldwood executives are former senior executives of Dynamic Offshore Resources, which was the first partnership between River-stone and the Fieldwood management team. SandRidge Energy Inc. bought out Dynamic Offshore resources in February 2012 for about $1.3 billion.

Atlas bags assets in Arkoma, Black Warrior, Raton basins

Atlas Energy LP (NYSE: ATLS) completed its acquisition of 45 billion cu. ft. (Bcf) of natural gas proved reserves in the Arkoma Basin in southeastern Oklahoma from EP Energy E&P Co. LP for $67 million.

In addition, Atlas Energy’s E&P subsidiary, Atlas Resource Partners LP (NYSE: ARP), completed its acquisition of 466 Bcf of natural gas proved reserves primarily in the Raton and Black Warrior basins of New Mexico and Alabama, respectively, from EP Energy, for $733 million. In conjunction with the closing, Atlas Energy purchased 3.75 million class C preferred units of Atlas Resource Partners for $87 million.

Atlas Energy funded the acquisition of the Arkoma assets and the purchase of the preferred units by issuing a six-year $240-million senior secured term loan credit facility. Deutsche Bank Securities and Wells Fargo were joint lead arrangers and joint book-runners.

Atlas Resource Partners financed a portion of the transaction with $400 million in equity, including $313 million through a public offering of newly issued common units and $87 million of the preferred units purchased by Atlas Energy. In addition, Atlas Resource Partners funded the deal with a $250-million offering of senior unsecured notes; the remainder of the transaction was funded with its revolving credit facility. As a result of the closing of the EP Energy acquisition, the borrowing base of Atlas’ revolving credit facility has been increased from $430 million to $835 million.

Deutsche Bank Securities was financial advisor, and Wachtell Lipton Rosen & Katz and Ledgewood (Philadelphia) were legal advisors to Atlas Resource Partners.

Atlas is based in Pittsburgh.

Exco Resources closes Eagle Ford acquisition

Exco Resources Inc. (NYSE: XCO) closed the acquisition of producing and undeveloped oil and gas assets in the Eagle Ford from subsidiaries of Chesapeake Energy Corp. (NYSE: CHK) for $685 million in cash.

Exco financed the deal under its recently amended credit agreement, which has an initial $1.6-billion borrowing base, including a $1.3-billion revolving facility and a $300-million term loan. The acquisition had an effective date of April 1.

In connection with the closing, Exco entered into a participation agreement with entities advised by or affiliated with Kohlberg Kravis Roberts & Co. LP, including KKR Financial Holdings LLC (NYSE: KFN), and sold an undivided 50% interest in the undeveloped acreage for $131 million in cash. Proceeds from the sale of properties under the KKR agreement were used to reduce debt.

The participation agreement provides that Exco and KKR will jointly fund future development costs. Dallas-based Exco will assign half of its undivided 50% interest in the wells to KKR, which will fund and own 75% of each well drilled; Exco will fund and own 25% of each well drilled. When each quarterly tranche of wells drilled has been on production for one year, Exco has the right to offer to purchase KKR’s 75% working interest at fair market value, subject to specific well criteria and return hurdles. The parties have agreed on 300 identified locations to be drilled over a five-year period.

EV Energy sells some Utica acreage

EV Energy Partners LP (Nasdaq: EVEP) and institutional partners managed by EnerVest Ltd. have agreed to sell acreage in Ohio’s Utica shale for $284.3 million. EVEP’s cut is about $56 million for 4,345 acres, a sliver of the more than 100,000 acres the company owns in the shale.

Overall, an undisclosed buyer purchased 22,535 net acres in Guernsey, Harrison and Noble counties in the southern Utica’s wet-gas window. The deal was expected to close at the end of September.

EVEP chairman John B. Walker said in an earnings call that at less than 10% of its Utica exposure, the sale is nonmaterial. “I always consider $56 million meaningful,” he said. “So we still have plenty of acreage to sell, and I do believe that we’re communicating a very good value marker for the wet-gas window here.”

Since 2012, EVEP and EnerVest have been marketing the land, which consists of more than 330,000 EnerVest net working interest acres. EV Energy Partners is a publicly traded MLP, with EnerVest serving as the controlling member.

In the second quarter of 2013, executives revised their pitch by marketing smaller packages to line up with potential buyers’ focus areas.

EVEP will retain its overriding royalty interests in the land.

“This is a good first step in our revised Utica acreage sale process,” Walker said. “The value of this sale averages $12,900 per acre. We look forward to announcing additional deals as they occur.”

In fact, the land’s value commanded a price 72% higher than a model by Baird Energy Partners, which had estimated a price of $7,500.

FANG to buy Midland Basin acreage

Diamondback Energy Inc. (Nasdaq: FANG) has agreed to buy 11,150 net acres in the Midland Basin for $165 million. The leasehold is located in northern Martin County and southern Dawson County. The properties produced 800 BOE/d—81% oil—at the end of second-quarter 2013.

The proposed transaction, expected to close by the end of September, will increase the company’s leasehold interest in the basin to more than 65,000 net acres.

The purchase increases the company’s acreage position in the Permian by 20% and will be funded with current liquidity of $262 million, said Gordon Douthat, senior analyst for Wells Fargo Securities.

Simmons & Co. International analysts said Diamondback added acreage in the Midland Basin at a good price. They calculate that at an $80,000-per-BOE/d cost, Diamondback purchased the acreage for about $9,058 per acre. That compares with the Pioneer Natural Resources Co. (NYSE: PXD) joint venture with Sinochem in the southern Midland Basin, which was valued at $20,500 per acre on an undiscounted basis.

The acquisition includes development potential for 69 net horizontal Wolf-camp B locations, based on 160-acre spacing.

Questar sub to boost interest in Vermillion Basin

Wexpro Co., the subsidiary of Questar Corp. (NYSE: STR), has agreed to acquire an additional interest in natural gas-producing properties for $106.4 million.

Wexpro is increasing its working interest in existing Wexpro-operated wells in the Trail Unit of southwestern Wyoming’s Vermillion Basin. Essentially, this is a bolt-on acquisition to the company’s current Trail assets, which are governed by the 1981 Wexpro agreement for the benefit of Questar’s Utah and Wyoming utility customers.

Wexpro already owns 46% working interest in the properties being acquired; this acquisition will increase that interest to 88%. It will also add an estimated 118 billion cu. ft. equivalent (Bcfe) of net proved reserves, about 45% of which (53 Bcfe) are currently proved developed. Wexpro estimates proved plus probable and possible reserves attributable to the properties are 195 Bcfe.

In addition to 78 producing wells, Wexpro has identified 172 additional well locations for future development on a combination of 20- and 40-acre spacing. The development targets Mesaverde sands (Almond, Canyon Creek and Trail) that Wexpro has developed for several years. The company estimates average gross reserves attributable to each future Mesaverde well at 2 to 3 Bcfe, with well costs between $1.7 and $2.1 million.

The company expected to close the transaction by the end of August. Wexpro is headquartered in Salt Lake City.

Whiting adds acres in D-J, 400,000 in ‘stealth areas’

Whiting Petroleum Corp. (NYSE: WLL) has purchased 32,506 net acres in the Denver-Julesburg Basin. The acreage was acquired after the second quarter of this year for about $400 to $500 per net acre. About 50% of the net acres are in the core of Whiting’s Red-tail Prospect and have no expiration issues, said David Tameron, senior analyst for Wells Fargo Securities, in a report.

Whiting has 87,559 net acres in the Redtail area with average working interests of 73% and net revenue interests of 59%. It is planning 16 wells per drilling spacing unit but is testing 32 wells per unit.

Sanchez steps into Tuscaloosa Marine shale

Sanchez Energy Corp. (NYSE: SN) announced it is acquiring 40,000 net acres in the core of the Tuscaloosa Marine shale for $78 million. The undeveloped land would be paid for with $70 million cash and 342,760 shares of common stock valued at $8.2 million. The acreage is contiguous and has three or more years of remaining lease terms to allow for further de-risking.

Tony Sanchez III, president and chief executive officer, said the company has been watching the evolution of the Tuscaloosa for nearly three years and assessing the technical and economic development of the play.

“We now believe it is an appropriate time for Sanchez Energy to enter the play and we have the opportunity to do so by leveraging the groundwork undertaken by Sanchez Resources over the past several years,” he said. ”With the closing of this acquisition, we believe we have secured a solid acreage position in the core of this rapidly developing trend.”

Jeff Dietert, Simmons & Co. International managing director and head of research, noted that the purchase was funded by Sanchez Resources, the private partnership controlled by the Sanchez family, and an unaffiliated private-equity firm.

ConocoPhillips to sell Clyden oil-sands asset

ConocoPhillips (NYSE: COP) has agreed to sell its 100% interest in the Clyden oil-sands leasehold to Imperial Oil Ltd. (NYSE: IMO) and ExxonMobil Canada for $720 million (C $751 million).

Comprising 226,000 net acres of undeveloped land, Clyden is near the southern edge of the Athabasca oil sands and south of Fort McMurray, Alberta.

ConocoPhillips currently holds an approximate 1.1 million net acres of land in the Athabasca region. The significant bitumen deposits on these lands are estimated to contain 16 billion net barrels (bbl.) of resources, making ConocoPhillips the holder of one of the largest land and resource positions in the region.

Closing is contingent upon approval by Canada’s Competition Bureau.

ConocoPhillips is headquartered in Houston.

Pioneer Nat. Resources, Pioneer SW Energy to merge

Pioneer Natural Resources Co. (NYSE: PXD) and Pioneer Southwest Energy Partners LP (NYSE: PSE) have agreed to merge, with Pioneer Southwest becoming a wholly owned subsidiary of Pioneer’s operating company, Pioneer Natural Resources USA Inc., through a stock-for-unit exchange. Under terms of the merger agreement, Pioneer Southwest’s public unitholders would receive 0.2325 of a share of common stock of Pioneer per Pioneer Southwest common unit, plus a whole share of Pioneer common stock.

The transaction is expected to result in 3.95 million additional shares of common stock being issued by Pioneer. Regular quarterly distributions on the Pioneer Southwest common units will continue until the closing.

Pioneer is headquartered in Dallas.

Additional M&A News

• Chevron Canada Ltd. has acquired all interests from Alta Energy Luxembourg S.à.r.l. and affiliates in the Duvernay shale for an undisclosed amount.

The acquired interests cover 67,900 net acres in west-central Alberta.

Chevron Canada in the second half of 2011 commenced a multiwell exploration program for unconventional resources in the Duvernay formation. Initial production was achieved in 2012 on these 100%-owned and -operated leases.

Chevron Canada Ltd. is an indirect subsidiary of Chevron Corp. (NYSE: CVX), and is based in Vancouver, British Columbia.

• Whitecap Resources Inc. (Toronto: WCP.TO) closed its acquisition of certain strategic light-oil assets located predominantly in its core Valhalla and Garrington operated areas of Alberta for total consideration of $173.6 million. The acquisition adds 2,900 bbl. of oil equivalent (BOE) per day (56% oil and natural gas liquids) of high-netback, low-base-decline production (16% current decline rate) in areas where Whitecap already operates 96% of the production.

The acquisition was partially funded through a bought-deal public financing that closed on July 18, 2013, through a syndicate of underwriters co-led by GMP Securities LP and National Bank Financial Inc. and including Dundee Securities Ltd., FirstEnergy Capital Corp., Macquarie Capital Markets Canada Ltd., TD Securities Inc., CIBC World Markets Inc., Raymond James Ltd., Scotia Capital Inc., Peters & Co. Ltd. and RBC Capital Markets.

• QR Energy LP (NYSE: QRE), Houston, closed its acquisition of mostly oil properties in the Ark-La-Tex area from a private seller for $109.2 million.

The transaction is a bolt-on acquisition of mature, legacy properties contiguous with existing company assets in the East Texas oil field. QR Energy financed the acquisition with cash on hand and borrowings under its bank credit facility.

• Gastar Exploration Ltd. (NYSE: GST) closed the sale of its interests in 76,000 net undeveloped acres in Kingfisher and Canadian counties, Okla., to an undisclosed third party for $60.1 million in cash and 1,850 net acres of undeveloped leasehold.

With the closing, and the previously completed acreage sale to Gastar’s partner in its initial Hunton area of mutual interest, Gastar’s total acreage in the Hunton Limestone play will be some 136,800 gross (96,400 net) acres.

Gastar is based in Houston.

• Natural Resource Partners LP (NYSE: NRP) completed its acquisition of nonoperated working interests in the Bakken/Three Forks play from Abraxas Petroleum Corp. (Nasdaq: AXAS) for $38.3 million in cash after purchase price adjustments.

The acquisition consists of approximately 13,500 net acres held by production with an estimated average working interest of 11% in the Bakken/Three Forks play. Also included are some 134 producing wells and interests in 18 wells in various stages of development. NRP expects the acquisition to be immediately accretive to its unit holders.

NRP Oil & Gas LLC, the wholly owned subsidiary of Natural Resource Partners LP that acquired the Bakken/Three Forks assets, has entered into a senior secured, reserve-based revolving credit facility to fund development of the assets.

Natural Resource Partners LP is headquartered in Houston; its operations headquarters are in Huntington, W. Va.

• EnerJex Resources Inc. (OTCQB: ENRJ) has entered into a merger agreement to acquire Black Raven Energy Inc., a privately held oil and natural gas E&P.

Upon consummation of the merger, each share of Denver-based Black Raven common stock will be converted into 0.34791 of a common share of San Antonio-based EnerJex, subject to certain adjustments, resulting in Black Raven stockholders owning approximately 37% of the post-merger company on a diluted basis.

The combined enterprise will be a Midcontinent-focused independent with a deep inventory of low-risk drilling opportunities and exposure to emerging unconventional oil resource plays through its sizeable acreage footprint in the Denver-Julesburg Basin.

Additional news

• Parsley Energy LLC closed on a $65-million preferred equity investment by

Natural Gas Partners. Since its inception, Midland, Texas-based Parsley has drilled over 270 wells and is currently producing over 17,000 BOE per day on a gross operated basis and more than 5,000 BOE per day net. With more than 73,000 net acres and 60 employees, Parsley plans to continue executing on its high-growth business plan. Parsley will continue to focus on vertical development in the Wolfberry play and will also begin its horizontal drilling program in the fourth quarter of 2013.

People news

• MLV & Co. announced that Chad Mabry has joined the firm’s equity research team as a director and equity analyst in energy and natural resources. Mabry will work out of MLV’s recently opened Houston office and will focus his research coverage on the exploration and production sub-sector.

He joins Michael Peterson, who covers MLPs for the New York-based firm. Mabry expects to initiate coverage in the early fall, focusing on small- and mid-cap E&Ps names.

Mabry was previously with KLR Group in Houston, and, before that, with the energy research team at Rod-man & Renshaw Group.

• Miller Energy Resources Inc. (NYSE: MILL) appointed David M. Hall as chief operating officer. Hall has been the chief executive of Miller’s wholly owned Alaskan operating subsidiary, Cook Inlet Energy (CIE), since 2009 and will continue in that capacity. In his new role as chief operating officer, he will oversee all of Miller’s drilling operations, in both Alaska and Tennessee.

Deloy Miller, who previously was chief operating officer, will continue to serve as executive chairman of the board of directors, a position he has held since Miller’s formation in 1967. The company is headquartered in Knoxville, Tenn.

• Murphy Oil Corp. (NYSE: MUR) named Roger Jenkins president and chief executive officer. He succeeds Steven A. Cossé. Cossé will remain a member of both the board of directors and the executive committee.